Instituto de Economía

Abstract: We study efficient insurance arrangements where there is complete information but transfers are constrained by a stochastic process directed by an underlying social network. We analyze both the full commitment environment as well as the limited commitment environment. Under each regime we study the price of personalized debt – a bond requiring a given individual to pay a unit to the holder in a given period and develop a measure of financial centrality which provides an ordering over how network position maps into the price of the personalized debt.